The housing crisis of the last decade was partially caused by unhealthy levels of mortgage debt. Homeowners were using their homes as ATMs by refinancing and swapping their equity for cash.
When prices started to fall, many homeowners found themselves in a negative equity situation (where their mortgage was higher than the value of their home). As a result, they walked away. This caused prices to fall even further.
Headlines are again talking about record levels of mortgage debt, making the comparison to the challenges that preceded the housing crash. However, cumulative debt is not an important data point. If we look at the debt as a percentage of disposable personal income, we are at an all-time low.
Here’s a visual representation of mortgage debt as a percent of income:Furthermore, according to a new report from ATTOM Data Solutions, more than 1-in-4 homes with a mortgage have at least 50% equity. The report explains:
“Over 14.5 million U.S. properties were equity rich — where the combined estimated amount of loans secured by the property was 50 percent or less of the property’s estimated market value — up by more than 834,000 from a year ago to a new high as far back as data is available, Q4 2013.”
Unlike 2008, homeowners have a comfortable level of mortgage debt and are sitting on massive amounts of home equity. They will not be walking away from their homes if the housing market begins to soften.
Author:Brian Hargrove Phone: 919-830-5233 Dated: July 3rd 2019 Views: 166 About Brian: ...
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"One day, after Mr. Michael Johnson, took my wife and myself around for literally four (4) hours, perhaps even more on that day, looking for a house. I was at the point where I myself was saying to him that I thought that he had done enough for that day. We got to a lot in Wake Forest, that both my wife and myself liked. And as we stood there looking around I began speaking to Mr. Johnson, about my financial situation which to be truthful I am not proudful about one bit. Considering my age, and the length of time my wife and I have worked and yet our financial condition sucks, forgive my english grammar. Mr. Johnson, stood there and listened to me rant and rave about this matter, without as much as saying one single word. His eyes full of tears but yet he did not cry. He knew that I was hurt and ashamed of my situation, but not once did he as much as give me an idea that he did not care. I will never as long as I live forget that moment in my life, never. Mr. Johnson, then said to me after I dried my eyes from the tears that I shed there in front of him, he said to me, Oscar, we will do all we can to find you a home, I promise you that. Well, on December 31st. my wife, Carlota Belmo, Mr. Nelson Estrela, of New Penn Financial, Mr. Hamrick, the Attorney, Mr. Michael Johnson and myself Oscar Belmo, were at the table for closing on the home of our dream. Thanks to the effort of so many hard working people and the Grace of God. Thank you, thank you, thank you from the bottom of our heart. We love each and every one of you. God, bless you. May God, bless and keep each and every one of you."